How The Gig Economy Is Transforming Accounting... And Society

Dane Pflueger, Martin Kornberger and Jan Mouritsen are respectively Professors at HEC Paris, EM Lyon and Copenhagen Business School

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eBay’s millions of users not only do the buying and selling, but also the work of middle management: they audit, review, rank, and give feedback to each other. Without all of this work, eBay would not have its power

Platform organizations like Airbnb, eBay, Alibaba and Uber are being heralded as either saviors or villains. They are said to be a healthy cure for hyper-consumption, allowing people to share their excess resources with each other. They are also criticized as a “nightmarish form of neoliberal capitalism”, underscoring the need to move from platform capitalism to platform cooperativism. The contested political economy of platform capitalism highlights the importance of clearly grasping these organizations’ inner workings. And one way to do this is by understanding their novel accounting regime.

Controversial as the unicorns are, what is indisputable is that they are mobilizing a new organizational form that blends markets and hierarchies. This new organizational form is giving birth to paradoxical realities. As the British daily Independent reporter, Hamish McRae, observes: “The world's largest taxi firm, Uber, owns no cars. The world's most popular media company, Facebook, creates no content. The world's most valuable retailer, Alibaba, carries no stock. And the world's largest accommodation provider, Airbnb, owns no property.” His conclusion: “Something big is going on.”

Creating Novel Forms Of Accounting For The ‘Gig Economy’

As researchers specialized in organization and accounting from HEC Paris, EM Lyon and the Copenhagen Business School, we have spent the past five years exploring the accounting practices that underpin these new organizational forms. Given the massive economic wealth that they generate, we believe this is a timely task. Indeed, PricewaterhouseCoopers estimates the transaction value facilitated by collaborative economy platforms in Europe to be €28 billion. This means it has tripled since 2013, and its global revenue is set to reach $335 billion by 2025.

This value creation requires the reorganization of the economy and the factors of production. As of 2014, eBay had 165 million active users. With under 8,000 employees, Uber is valued at close to $70 billion. That’s more than General Motors, which employs over 200,000 people and manufactures annually close to 10 million cars. And Airbnb was facilitating 155 million guest stays annually, surpassing the Hilton worldwide by 22 percent. These unicorns rely heavily on a sharing or platform economy - nicknamed the “gig economy” - which doles out work in bits and pieces, usually controlled by a technology platform.

Unquestionably, a major reason for this success is technology: the Internet reduces search and other transaction costs, facilitating the effective coordination of distributed economic activity. But it also requires new forms of accounting and management control to create trust between anonymous users—forms that demands we develop a whole new vocabulary to understand it.

eBay And The Notion Of Evaluative Infrastructure

To do this, we have focused on these firms’ novel accounting regime and designed a concept we call evaluative infrastructure, aimed at grappling with the new disruptive phenomenon of platform organization. At its core is the idea of extending accounting beyond its usual context (based on a hierarchical consciousness) to one where elements of an organization are unranked (what’s called heterarchical practice). This approach equips accounting scholars with critical instruments to analyze the invisible infrastructures which coordinate and control activities in platform organizations.

To illustrate the mechanisms and effects of evaluative infrastructures, let’s look at the example of eBay. This company, originally called AuctionWeb, manages its 12,000 employees as any other hierarchical company would do (with budgets, performance targets, bonuses, etc.). But eBay’s production process requires the mobilization and control of its hundreds of millions and users dispersed across the globe. The firm cannot manage these users like it does its employees. What it uses instead are evaluative infrastructures.

How? Well, by producing and pulling together digital traces – clicks, rankings, reviews, etc. - that are left intentionally and unintentionally on the site. Through something called “Little Analytics”, this Big Data is tuned into new and important categories and distinctions. By finding correlations and relations between millions of data points, a whole world - the reputation of buyers, the qualities of products, etc. - is disclosed.

The Creation Of Trust Between Users

This evaluative infrastructure produces trust by relating anonymous actors to each other in sometimes novel ways. Constantly generating and combining new data, eBay and other platform organizations, disclose attributes of people, products, etc., thereby engineering new and different ways to constitute a ‘match’. Just like a new highway built into wilderness - disclosing the opportunity to travel, visit and settle -, evaluative infrastructures make it possible for a new world of relations to emerge (even if they too often mirror real world prejudices).

Crucially, through its evaluative infrastructure, eBay creates the non-economic values it relies on for its economic success. Consequently, eBay's economy is not “embedded” in society. Rather, eBay's evaluative infrastructure creates the necessary socio-cultural conditions for its economic activity to emerge. Emerging evaluative infrastructures are the decentralized issuers of new currencies enabling new forms of exchange and accumulation.